Indonesia is on the Verge of an Economic Crisis?

VOICES.NEWS - In Jakarta, Indonesia, the rupiah weakened to Rp15,010 per United States dollar at 8:53 a.m. on Wednesday in the spot ma...





VOICES.NEWS- In Jakarta, Indonesia, the rupiah weakened to Rp15,010 per United States dollar at 8:53 a.m. on Wednesday in the spot market as quoted by Bloomberg.

Similarly, the Jakarta Interbank Spot Dollar Rate (JISDOR), the rupiah exchange rate, was also quoted at Rp 15,11 per US dollar on Wednesday from Rp 15,055 on the previous day.

Analysts said the weakening of the rupiah and other regional currencies were sparked by the worry about the weakness of the economic ministers of Jokowi's cabinet and the global trade war that pushed investors to secure their assets.

Minister of Finance Sri Mulyani may say thousands of times, national economic governance is prudent. But why does the rupiah exchange rate and purchasing power decline steadily?

Analysts warned that Sri Mulyani did not need to repeat the prudent economic governance problem. Because, the statement can create a manipulative impression.

Why? Yes, that was. Like it or not, the Indonesian economy is still slumping, moreover the amount of foreign debt is increasing. Naturally, if the public starts to doubt the statement. Is Sri Mulyani really careful?

So far, Risks and Credit Default Swaps (CDS) from Indonesia, continue to rise from the 80s in January 2018, to 136. While the trade balance and current account, continue to experience a negative alias deficit. Meanwhile, loans in foreign exchange (US $) continue to increase. As a result, the exchange rate of the rupiah against the United States currency is still weak.

Analysts also request that whenever there are economic and monetary problems in the country, the Working Cabinet economic team does not only blame external or foreign factors. That's why cheap apologetic symptoms, describing the inability and deadlock of ideas or breakthroughs.

Speaking of the current Indonesian economic conditions, Sri Mulyani did not need to dodge if conditions were not good. Be honest that the atmosphere is indeed more difficult.

Economists often remind Sri Mulyani to be cautious, because the Indonesian economy has entered a yellow light. The reason, there were 4 deficits at once. These four deficits are the trade balance, balance of payments, budget balance, and Current Account Deficit / CAD.

Specifically for the current account balance, the deficit was very large, at a time of minus US $ 9.8 billion. In February 2017, the current account deficit was US $ 1.8 billion. In May 2017, the deficit increased to US $ 2.4 billion.

Furthermore, in August 2017, the current account deficit jumped more than 100% to US $ 5 billion. The most severe is the current account balance in the first quarter of 2018 which experienced a deficit of up to US $ 5.5 billion. This acquisition is the worst in the last five years.

The magnitude of the current account deficit in the early quarter of 2018 doubled compared to the deficit in the same period in 2017. The widening of the current account deficit in the first quarter of 2018 was triggered by a drop in the goods trade balance surplus by 50%. From US $ 5.63 billion (quarter I-2017) to US $ 2.36 billion (quarter I-2018).

As a note, Indonesia's goods exports in the first quarter of 2018 were recorded at US $ 44.41 billion. while the import value of goods reached US $ 42.05 billion. While the export value in the first quarter of 2017, increased by 8.95%. It's just lost with the growth of imports which shot up to 20%. As a result, that was it. The current account deficit is reckless.

Where, non-oil and gas exports in the first quarter of 2018 year-on-year (yoy) grew 9.4%. Far below the acquisition in the first quarter of 2017 of 21.9% (yoy). Meanwhile, non-oil and gas imports grew significantly by 22.8% (yoy) in the first quarter of 2018. Far above the first quarter -2017 of 8.1% (yoy).

Economists often remind Sri Mulyani to be cautious, because the Indonesian economy has entered a yellow light. The reason, there were 4 deficits at once. These four deficits are the trade balance, balance of payments, budget balance, and Current Account Deficit / CAD. The widening of the current account deficit puts serious pressure on the rupiah exchange rate. So, the weakening of the Indonesian people's pride currency is not merely an external factor. Because, there are clearly many weaknesses in our domestic sector.

If not managed properly, the economy in the Jokowi era could continue to deteriorate to a red light. If it's a red light, all the worst possibilities will get closer to real.

So far Indonesia has not been agile in improving weak macroeconomic factors and often blames external factors. Is that the factor of the Fed, the factor of Malaysia, the Chinese factor.

The widening of the current account deficit put serious pressure on the rupiah exchange rate. So, the weakening of the Indonesian people's pride currency is not merely an external factor. Because, there are clearly many weaknesses in our domestic sector.

Now, it's time we stop blaming external factors.

The Indonesian economy in the Jokowi era is vulnerable to the turmoil of globalization due to the weakness of the Working Cabinet ecumenical team. While some countries can even grow with a good economy. A number of countries are able to withstand global shocks.

The difference with Indonesia, India's economy grew 7.3%. Likewise with the Philippines, its growth was 7.2 percent. So, Jokowi and the economic team, should stop to blame the global. Just focus on efforts to improve the economy in the country.

Just so you know in the past, the condition of the Philippine economy, was once the worst. Today, the Philippines is a great country. Because the growth can be 7.2%. While Indonesia is only able to grow 5% more or less.

Meanwhile, about the domestic tax issue, some are very severe. Taxes for the lower middle class, chased and boosted by Sri Mulyani. But the tax for the snapper gold mine, Freeport, was lowered. Clearly there is no justice. Very thick neoliberalism with a hard, brutal character.

The government also continues to make various tax withdrawal efforts, including the tax amnesty program and cooperation related to international tax disclosure. Correcting the steps, Sri Mulyani pursued tax from the business world.

In other countries, when the economy slows, taxes are loosened. If it has improved, may be encouraged slowly. Jokowi's era is the opposite. Once again, the condition of the Indonesian economy is currently entering the risk-susceptible status of the yellow light.

Almost everyone feels that political and economic dynamics are entering an era of tension. Especially the business world and civil society smell unpleasant signs. Indonesia is on the verge of an economic crisis?

Now, some intellectuals and economic analysts are relatively critical of the way the government manages a very conservative and neo-liberalism macro-economy. Where, the characteristic of neoliberalism is that it only relies on austerity programs in the midst of tax contraction and economic contraction. In fact, this concept has proven to fail worldwide, both in Latin America, Greece and other European countries.

As a result of conservative economy and neoliberalism, various indicators show negative numbers. Even so, austerity policy has made it harder for the people's economy, since mid-2016. Where, Indonesia's economy continues to stagnate. This condition can get worse until the end of the year, if President Joko Widodo's chosen economic team is not careful. It should be noted, economic growth from 2016 to 2018, did not move from the 5% figure.

At present, the public, especially market participants need ideas or smart breakthroughs from the Jokowi’s Economic Team. In order for the economy to get excited again and the rupiah increasingly muscular. And buying power can recover as usual. Actually, people need more work with real results. Not working with sweet words on the face, but behind them is suffering. The people hopes and prays that President Jokowi is aware of this conditon and situation to find a solution quickly and effectively.***
_____________________


Written by Herdi Sahrasad, Associate Director The Media Institute & Centre for Islam dan State Studies, University of Paramadina, Jakarta. He is a research scholar for political economy, Islamism and International Affairs. And he was a formerly visiting fellow at Indiana University, USA (1989), Monash University Australia (1992), University of California, Berkeley,USA (2012) and Leiden University, Holland (2018).


Related

Headlines 9155027365883908178

Top Stories


Editor's choice

item